The actual correr released by – Nigeria’s capital market limiter SEC today, investment platforms providing access to foreign securities might be treading on dangerous grounds.
In line with the SEC regulations that have just been brought to light, these platforms are trading foreign securities not registered in the country and have been warned to stop doing so. Capital market operators in partnership with them have also been warned to renege on providing brokerage services for foreign securities.
Within the last three years, Robinhood-esque platforms like Bamboo, Trove, Chaka and Rise have sprung forth in the Nigerian fintech space. They offer Nigerians use of stocks, bonds and other securities in both local and international markets. These platforms have grown in popularity among the middle class and provide a haven to protect earnings from naira devaluations.
That said, there’s a vast difference in how they operate when compared to Robinhood. And also being a trading app, Robinhood offers online brokerages (introducing and clearing) and also zero commission trading. Nigerian investment platforms do not, and while any trading platform can get a brokerage license in the U. S., it can be a Herculean task to obtain one in Nigeria. This is where capital market operators (local and foreign brokerage firms in this case) come into play, forming strategic partnerships with these businesses so Nigerians can access both local and foreign fractional securities.
After a series of regulatory onslaught from different government bodies on tech startups last year, the SEC followed suit in December. It singled out Chaka , one of the platforms and accused it of selling and advertising stocks. The regulator’s definition of the so-called offence was that Chaka “engaged in investment activities, including providing a platform for purchasing shares in foreign companies such as Google, Amazon, and Alibaba, outside the Commission’s regulatory purview and without requisite registration. ”
The company’s CEO, Tosin Osibodu, denied any wrongdoing, and because the turn of the year, not much has been heard from the SEC and Chaka regarding this matter before the release of today’s circular. Unsurprisingly, the regulator continued from where it left off, only this time, all investment platforms including brokerage firms — not merely Chaka — are involved. SEC’s subtle directive is to stop selling, issuing or offering for sale any foreign securities not listed on any exchange registered in Nigeria.
What this inherently means from now on is that investment platforms could have their work cut out and might only offer individuals usage of only local stocks and securities. This affects the business models of these startups. And the core value they supply, which is to help Nigerians store monetary value and hedge next to naira devaluation is at a threat of being wiped out.
Here’s the information shared by the regulator as come across on its website:
A person’s eye of the Securities and Loan Commission (the Commission) might drawn to the existence of several expert services of online investment together with trading platforms which purportedly be of assistance direct access of the investing vital in the Federal Republic to do with Nigeria to securities having to do with foreign companies listed on Sec Exchanges registered in other jurisdictions. These platforms also claims to be operating in partnership which has Capital Market operators (CMOs) registered with the Commission.
The Commission categorically states that by the provisions of Sections 67-70 on your Investments and Securities Move (ISA), 2007 and Trumps 414 & 415 for this SEC Rules and Regulations, only unknown securities listed on any Swap registered in Nigeria might well be issued, sold or proffered for sale or subscription to your Nigerian public. Accordingly, CMOs who work in concert with the referenced online platforms are typically hereby notified of the Commission’s position and advised to positively desist henceforth.
The Commission enjoins often the investing public to seek filtration as may be required by signifies its established channels within communication on investment cures advertised through conventional also online mediums.
This is a having story. More to follow…